A startup company employed a scientist. The employment agreement stipulated that intellectual property belonged to the company and that the issue of employee stock options would be settled later. After 8 months, a dispute arose regarding the option terms (the company's requirement for a vesting period and actual work), the scientist decided to go on unpaid leave and was eventually terminated. Approximately 7 years later, the scientist sought to invalidate the employment agreement, alleging misrepresentation during negotiations regarding the technology's maturity and the option terms he would receive, and demanded recognition as the owner of the intellectual property he developed.
The Court rejected the scientist's motion and held that the company had not committed any misrepresentation. A party to an agreement has the right to invalidate the agreement if misrepresentation occurred during its formation. Misrepresentation is a defect in the will of the party entering the contract resulting from a false representation by the other party. However, a mistake regarding the transaction's worthiness does not allow for contract invalidation. Here, at no stage was the scientist promised options 'from day one'; rather, any grant was to occur only subsequent, and subject, to the approval of the company’s ESOP, with no specific timeline established for the execution of an option agreement. Furthermore, the agreement expressly stipulated that all inventions created by the scientist for the company during the term of his employment belong to the company. Accordingly, all intellectual property rights belong to the company.